From the May 2005 Idaho Observer:


The Great Social Security Robbery

Making good on his campaign promise to "fix" Social Security, President Bush recently toured the nation hawking his plan to partially privatize the government-administrated retirement plan for working class America. While government employee retirement plans are flush, government analysts report that Social Security is heading toward insolvency. Never addressed by President Bush is the question, "Why is Social Security going bankrupt?" It seems illogical to propose a fix for something without explaining why it broke in the first place. As described below, we can see that President Bush, who has probably never been required to balance a checkbook, is not proposing to "fix" Social Security. In fact, it would appear that the opposite is true.

 

by F. William Engdahl

The Bush administration and the entire Republican White House campaign apparatus have made the issue of Social Security privatization the priority of its second term domestic agenda. The President has been on a campaign tour across small-town America to promote what he calls his ‘Ownership Society.’

The Bush Social Security campaign has the intensity of a Bush Presidential campaign. Lobby groups are in full swing, and private watchdog organizations estimate at least $100 million is being spent in private funds, let alone the cost of unreported U.S. Government efforts, in making the pitch for the Bush "Personal Retirement Accounts." The Treasury has hired top staff solely to oversee the campaign, bordering on the illegal, to provide ammunition to the White House. Treasury has a Social Security ‘War Room,’ and a special government website for it. Never before have so many Government officials been sent on tour for a Bush issue aside from the Iraq war. Vice President Cheney, Bush, and four Cabinet members have been making a ’60 cities in 60 days’ campaign tour.

The President insists Americans would end up with a stronger Social Security system and bigger retirement funds under his proposal. "We can build a better system for low-income workers based on the power of investment and the magic of compound interest," said White House spokesman Trent Duffy.

Is this about the "power of investment and the magic of compound interest?" The Bush Social Security privatization scheme is a cynical ruse to steal ordinary taxpayers’ life savings in an attempt at what perhaps might be the last big stock market bubble before the inevitable crash in the next years. Wall Street bankers have been salivating for years at the prospect of getting guaranteed cash inflows to gamble on the notoriously corrupt US stock market. Here are some little-mentioned aspects of the issue.

How private accounts

would work

In his State of the Union Address, President Bush did give some details of the private accounts, but did not mention a critical fact, namely, individuals who choose to take up these accounts also would get a large, automatic reduction in their Social Security benefit payment.

According to a recent article in the Washington Post, Bush would have Americans born after 1950 put 4 percent of their income subject to Social Security taxes into personal retirement accounts, in exchange for a reduction in guaranteed benefits. They would invest the money in private stock and bond funds they couldn’t touch until they retire.

According to a Washington think-tank, the Center for Budget and Policy Priorities, "the President’s plan would allow an average earner to mortgage about half of his or her Social Security benefit. The worker essentially would borrow money against about half of his or her benefit, invest the money, and then repay the borrowed money to the Social Security Trust Fund in the form of an automatic benefit reduction at retirement. The benefit reduction would remain in effect for the rest of the worker’s life. The President also did not note that his private-account proposal would do nothing to improve Social Security’s solvency — something a senior White House official acknowledged at a media briefing earlier on February 2 — and the President declined to propose or endorse any policy that would restore solvency." (1).

In plain English, the President is deliberately masking the true effect of his plan, acInstitute’s Social Security Choice program.

The SIA also belongs to the pro-privatization Alliance for Worker Retirement Security (AWRS), a coalition set up by the National Association of Manufacturers to promote private accounts. Charles Blahous, the Bush administration’s point man on Social Security, is a former president of AWRS.

Just after re-election last November, the White House met with SIA representatives to map out the campaign for privatization in the second Administration. The SIA has asked member firms to find like-minded employees to participate in pro-privatization events with President Bush. The White House refused to say how people were selected for the meetings, which they called "conversations" with the President.

Other backers of the Bush plan include the Financial Services Roundtable, which represents 100 of the largest financial firms. They recommend "mandatory individual accounts" as well as benefit cuts for Social Security.

The American Bankers Association (ABA) has been advocating Social Security privatization since 1999. It too belongs to the Alliance for Worker Retirement Security.

Is there a crisis?

The crucial question is whether the crisis is real, as Bush argues. Republicans have claimed the crisis is imminent. Bush is fond of saying "It’s bankrupt and we need to fix it…" In his January State of the Union Address, the President stated, "By 2018, Social Security will owe more in annual benefits than the revenues it takes in, and when today’s young workers begin to retire in 2042, the system will be exhausted and bankrupt." This is scary stuff. Bankrupt by 2042?

This is also a wee tiny bit exaggerated. Robert Ball, who was Social Security Commissioner until 1973 recently stated flatly, "There is no financial crisis in Social Security."

His view is that there will, at conservative GDP projections, be a Fund surplus until 2020, at which time the estimated $3 trillion of the Social Security Trust Fund would begin to make up the deficits for the baby boomer pension costs until the last have died off. By then demographics of a new mini-boomer generation born after 1966, would begin to generate more tax inflow into the fund.

Social Security Administration projections show that a 1.9 percentage-point increase in the existing payroll tax dedicated to Social Security would close the projected funding gap over a 75-year period. That is hardly catastrophic. The Congressional Budget Office (CBO) has estimated the gap could be closed over the next 75 years with just a 1.0 percentage-point increase.

On February 17, 2005, Federal Reserve Chairman Alan Greenspan appeared before the Senate Banking Committee. The press headlined his support for the President’s privatization. Not widely reported was the question period, where Greenspan admitted that the proposed privatization would not increase national savings. He argued that the key to fulfilling commitments to future retirees was to increase national savings.

Sen. Jack Reed (D-RI) asked Greenspan, "Would you also agree…that the private accounts will basically leave national savings unchanged since the government is borrowing money to give to individual citizens to invest in the market?" Greenspan replied, "Yes, I do."

More telling, he also admitted privatization would not make Social Security more financially secure. Sen. Chuck Shumer (D-NY) asked if, "setting up a private account under current conditions, not starting from scratch...does anything to alleviate the problem." Greenspan replied that setting up private accounts, "surely doesn’t alleviate the current problem."

Ideology and special interests

It is clear that a combination of Republican radical free market ideology and other considerations are driving the urgent push to privatize. Bush and Cheney are on record advocating "individual freedom" as tantamount to getting "closer to God."

Cheney has declared, referring to the private stock accounts, "Over time the securities markets are the best, safest way to build substantial personal savings."

He conveniently omits mention of periodic stock market crashes which have taken years to recover from.

Again, according to the Center for Budget and Policy Priorities, "Under reasonable assumptions developed and used by the Congressional Budget Office (which take into account the greater risk of stocks over bonds), this automatic benefit reduction would eliminate the entire value of the balances in the private accounts. In effect, the automatic benefit reduction would constitute a 100 percent tax on the retirement savings in those accounts. Even under the optimistic assumptions used by a senior administration official in a media briefing on February 2, the automatic reduction in the Social Security benefit would wipe out more than two-thirds of the value of the private account. The private accounts thus offer considerably less than advertised."

If Social Security is actuarially in far better shape than the Bush administration would admit, why is the issue such a burning priority? Clearly the issue is far more crucial to Bush and Cheney than most could imagine, and not because of concern for retirees in 2018.

Before the 2000 election Cheney was quoted in a New Yorker magazine profile saying his goal was to dismantle the entire New Deal social security system.

Mr. Engdahl is the author of "A Century of War: Anglo-American Oil Politics and the New World Order" (see ad page 4) and numerous articles on global economics.

The Great Social Security Robberyby F. William Engdahl

Reference: (1). "How the Individual Accounts in the President’s New Plan would work," Center for Budget and Policy Priorities, Washington, D.C., February 2005, by Jason Furman

Note: It is becoming apparent that the Social Security contract is central to the series of paper fictions government has created to reduce the status of Americans. Our first clue is obvious: Government employees generally retire comfortably; people who depend upon Social Security for their retirements generally settle miserably into abject poverty.

Aside from being forced to pay into a retirement plan that comes with a guarantee of poverty, the Social Security number is used to track us like livestock wherever we go. Further, because moneychangers have been in charge of our assets, record numbers of Americans are going broke; to squeeze us for the last few nickels, they intend to manage our privatized retirement accounts for us. (DWH)